The story so far: Facebook-parent Meta will have to pay $25 billion as a civil penalty for violations of New Mexico’s Unfair Practices Act, announced the U.S. state on October 21. The social media giant was originally slated to pay over $219 billion, or $5,000 per violation found by the jury. However, U.S. Judge Francis Mathew reduced the state penalty to $25 billion, even as the court order observed an “extraordinary number of willful violations” by Meta.
What was the case about?
As per the New Mexico Department of Justice (DoJ), the state’s litigation team looked into how Facebook communicated with consumers about its data practices, and the efforts it undertook to tackle misinformation and hate speech.
It found a variety of violations like deceptive statements regarding user privacy and hate speech moderation, unkept commitments on data deletion, poor oversight of developers collecting users’ data, and both public and private misrepresentations of how users could control their Facebook data.
The company’s violations were so numerous that they could not be pinned to a small number of employees, or even attributed to ignorance. On the contrary, the violations were backed by public statements and internal messages by leaders, including CEO Mark Zuckerberg.
“Rather than seek to educate Facebook’s users about their privacy settings, Mr. Zuckerberg chose instead to capitalize on that lack of understanding in order to manipulate users into sharing more of their personal information publicly; all so that Facebook could better compete with one of its main rivals, Twitter,” stated the court order.
One of the most crucial points in the case is the jury verdict finding that Facebook carried out over 43 million legal violations. The penalty, meanwhile, is meant to reflect the “financial consequences” of Meta’s conduct under the New Mexico law.
For context, the U.S. Federal Trade Commission (FTC) previously hit Facebook with a $5 billion fine over its post-Cambridge Analytica data practices. The New Mexico civil penalty, which is awarded to the state, is five times that.
Though New Mexico’s lawsuit against Meta stemmed from the Cambridge Analytica data privacy scandal in the 2010s, the legal proceedings expanded to also focus on Meta’s treatment of users’ data between 2010 and 2021.
Why is the penalty significant?
The $25 billion penalty is the largest fine Meta has ever faced over its conduct. It represents a tremendous — if currently symbolic — victory for a U.S. state that has launched multiple legal challenges against Meta.
In August, a U.S. judge in New Mexico ordered Meta to pay $567 million over child safety lapses on its platforms, adding on to the $375 million the company was ordered to pay this spring.
Now, the eye-watering $25 billion penalty is another achievement for New Mexico Attorney General Raúl Torrez, who has vocally criticised Meta’s operations and child safety record for years. The state sued Meta over its deceptive data handling practices in 2021.
“For too long, powerful technology companies have operated as though their size and influence put them beyond the reach of the law. A New Mexico jury found nearly 44 million violations of our consumer protection statute, and this penalty order demonstrates that those violations carry real consequences,” said Mr. Torrez in an official statement.
He called October 21 a “historic” day for both New Mexico and consumers across the U.S.
The penalty is also significant for reasons other than its scale: the fact that a singular U.S. state was able to launch a legal challenge against a global social media giant, have a jury find millions of legal violations, and see the company hit with a $25 billion penalty could also encourage other states — and even countries — to launch their own legal challenges against Meta.
Such lawsuits require states and government bodies to invest heavily in legal expenses and expertise. A successful precedent such as the New Mexico ruling makes future state-supported lawsuits more likely to be greenlighted.
How did Meta respond to the ruling?
The company plans to appeal the ruling, meaning any possible payouts could get delayed. However, according to the court order, interest on the penalty is set to accrue at 15% every annum, until it is paid in full.
“This ruling, and the Attorney General’s approach to this enforcement, makes it all but impossible to do business in the state of New Mexico. At its core, this lawsuit seeks to impose a tax on speech to enforce new rules for what people can say online,” Meta lawyer CJ Mahoney was quoted as stating by Reuters.